Employment Status – in praise of fuzziness

As we await the publication of the Taylor Review of Modern Working Practices, one issue that is being discussed is whether the definitions of employee and worker need to be simplified and/or clarified. There is a general feeling that that the current distinction between the two is rather vague and fuzzy – as is the distinction between those who are either workers or employees and the ‘genuinely’ self-employed. Most people instinctively feel that vagueness in legal definitions is a bad thing as it leads to uncertainty. I’m not convinced.

Sarah O’Connor, the employment correspondent for the Financial Times, wrote recently about the need for clarity – arguing that you can’t expect people to ‘plough through reams of case law to figure out if they have been misclassified’ and that ‘there is little point in having employment rights if no-one really knows to whom they apply’.

Its certainly a fair point and it chimes with the Law Society’s submission to the Taylor review in which it urged the clarification of employment status.To its credit the Law Society puts its money where its mouth is and actually proposes new definitions of worker and employee that it feels would lead to greater clarity and understanding. Here is their proposed definition of an employee:

A person in paid work is an employee if:

  1. (a)  they provide work under a contract of service or apprenticeship, whether express or implied; and
  2. (b)  the contract places an obligation on the employer to provide work, and the individual to accept and execute allocated work personally; and

(c) the employer retains control over how the work will be carried out, for example:

  1. where the work will be executed,
  2. how activities will be performed,
  3. the hours during which the work is to be performed; and

(d) the contract provides for regular remuneration by the employer regardless of the level of profit enjoyed by his business.

Be honest. Do you read that definition and think ‘Oh it all makes sense now!’? This attempt simply shows that clarifying employment status is easier said than done. Personally I don’t see how taking principles from leading cases and bunging them into the statute helps us very much. The Law Society’s proposed new definitions don’t really add anything. In fact, look at their proposed definition of a worker:

A person in paid work is a worker if they work (or worked):

  1. (a)  under a contract of employment (or other contract) whether express or implied; and
  2. (b)  the contract places an obligation on the worker to personally perform allocated work or service in a manner stipulated by the employer; and

(c) the contract does not provide that the worker will work exclusively for the employer; and

(d) the status of the employer is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the worker.

It seems to me that the line about performing work ‘in a manner stipulated by the employer’ is rather restrictive and  would actually have the effect of narrowing the scope of the law. Im sure that is not what is intended but it does show that coming up with a simple and clear definition is far from easy.

The essential problem with employment status is not that the definitions are vague, but that there is an incentive for employers (using the term in its broadest sense) to seek to limit an individual’s rights by drafting a ‘self-employed’ contract when in practice it is no such thing.

If we come up with new statutory definitions then that will simply give those employers a clearer target to aim at. If we specify that an employment contract is one which ‘provides for regular remuneration by the employer regardless of the level of profit enjoyed by his business’ – as the Law Society proposes – then some employers will draft clauses providing for pay to be reduced when the employer makes a loss. We would then see a whole new line of cases looking at how much variation in pay would take the contract outside the definition of employment and people would start arguing for the need to clarify the law all over again.

What we need is a system in which the Tribunal is able to cut through the terms drafted by lawyers and look at the reality of the situation. That’s what they try to do already – but they are not free to put aside the written terms of the contract without good reason.

I don’t think it should be a contractual analysis at all.

Where one person sells their labour to another then I think employment law should apply to that relationship unless the ’employee’ can be said to be in business on their own account. Whether they are genuinely running their own business should be a matter for the tribunal to decide, with a key factor being whether they seek to provide their services to the world at large or whether they depend on a particular ’employer’ to make their living.

I don’t see the need for a difference between employee and worker status – let’s just give full employment rights to everyone who works for someone else. Unfair dismissal is a pretty limited right anyway and redundancy payments are modest. I don’t see that this expansion of rights would create any great hardship for employers – and it would eliminate a lot of confusion. While we’re at it we could align tax law with the new definition and remove the incentive for many employees to play along with the rather artificial notion that they are self-employed.

Coming up with a new ‘clear’ definition of employment status is a hiding to nothing. Whatever definition is arrived at will simply create new and profitable areas of doubt and uncertainty. Removing the definitions would limit the scope for employers to draft their way out of employment law and free tribunals up to do justice between the parties. Clarity and certainty sound like good ideas, but in this context they are a mirage and there is no point in chasing them. Let’s go for fuzziness instead.

Fuzzy, but fair.

About Darren Newman

Employment law consultant, trainer, writer and anorak
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